- Jacob Goldman

HVAC-Tax-Incentives
Hospital operating room HVAC replacements are more expensive
than typical HVAC replacements because of the comprehensive
advanced planning that needs to occur. Operating rooms
conduct a vital hospital function and essentially need to be
available on a continuous uninterrupted basis. The advance
planning elements include engineering design, site preparation,
optimal timing, equipment staging, installation team scheduling
with quick changeover and post project cleaning to a pristine
site condition.

It is estimated that U.S. hospitals spend more than $6.5 billion
annually on energy costs, which is equal to about 15 percent of
hospital profits. The hospital sector has lagged in achieving
building energy efficiency as compared to other property sectors
and may be able to use new tax rules to its advantage.

These new tax rules, that became effective in the
beginning of this year, are particularly favorable for the more
expensive carefully conceived hospital operating room HVAC
replacement. In addition to a presumed decrease in
operating expenses due to new HVAC equipment, higher quality
HVAC may also help increase the bottom line at medical
facilities if it helps to reduce readmissions related to
hospital borne infections and their associated penalties
included in the Affordable Care Act. Tax deductions
combined with lower operating costs of new equipment and the
potential for penalty avoidance all combine to create a
compelling argument to consider HVAC replacement in 2014 or as
soon as possible.

Hospital HVAC Systems

Since hospitals are human-occupied, 24/7
facilities, HVAC is the largest building energy cost item.
However, the role of HVAC in hospital care cannot be
understated. Hospital HVAC systems are responsible for heating,
cooling and ventilation, but also infection control, removal of
harmful toxins, and providing environments conducive for medical
procedures and patient recovery. Energy efficient
ventilation allows hospitals to maintain low pressures for
highly contaminated rooms to reduce the spread of infection and
maintain high pressure in operating rooms to increase
airflow. Hospital HVAC systems can also detect fires and
eliminate smoke from exits and enclosures.

Operating rooms, specifically, often contain highly
sophisticated and heat generating equipment which increasingly
include robotic surgery systems and computers that require
precise environmental conditions to function properly.
HVAC systems in operating rooms are required to fulfill multiple
functions in order to keep both the humans and machines healthy
at all times.

By carefully planning and sequencing HVAC system replacements in
multiphase projects such as operating rooms, the combination of
lower operating costs and tax deductions will both positively
affect the bottom line.

HVAC Systems’ Role in Preventing
Hospital Infections

According to the U.S. Centers for Disease
Control and Prevention (CDC), about one in every twenty
hospitalized patients contracts a hospital-acquired infection
(HAI) and the associated cost to the health care systems is
about $10 billion a year. This is down dramatically from
previous estimates of $20 to $40 billion annually and shows that
some progress is being made but there is still room for huge
cost savings.

The hospital design, construction and facilities-management
communities play a crucial role in preventing HAIs and creating
a physical environment that supports quality care and positive
patient outcomes. The Center for Health Design analyzed
more than 120 independent studies before concluding that
clinical outcomes improved when patients received
quality-centered care in a healthcare facility where the
temperature, humidity and indoor air quality were effectively
managed.

The more hospital engineers and surgeons understand the safety
issues involving surgical HVAC, the better they can focus their
efforts to reduce infection rates of surgery patients and also
to lessen the financial burden of business interruption.

It should no longer be an issue for hospital engineers to simply
keep the surgeon from complaining that it is too hot in
surgery. There are very specific reasons for maintaining
proper air flow, direction, humidity and temperature in
surgery. These factors not only benefit the patient, but
reduce the risk of litigation brought against the hospital by
patients who develop infections.

Surgery is a vital service provided to the community and
important to a hospital’s financial well-being. Without a
well maintained surgical air handler and surgical HVAC system,
the entire surgical suite can be shut down, effectively closing
down other hospital departments as well.

Case Study Data

Following are some examples of our firm's
hospital building HVAC projects that have resulted in
significant tax savings.

Northeast
Psychiatric Facility
$ 720,000 Chiller Tax Deduction

Eastern VA
Hospital
$ 480,000 Chiller Tax Deduction

Northwest
Hospital
$ 175,000 Chiller Tax Deduction

Midwest Medical
Center
$ 180,000 Chiller Tax Deduction

Conclusion

Hospital building managers who replace
existing HVAC and meet the betterment, adaptation, and
restoration tests, may qualify for large tax incentives under
the law effective January 1, 2014. When making these decisions,
building managers should engage knowledgeable building tax
experts with HVAC engineering backgrounds to prepare supporting
HVAC tax incentive study documentation.